Amid Rising Food Costs, Tory Leadership Candidate Says He Would End Supply Management

Dairy cows rest at a farm in Eastern Ontario, in a file photo. (Sean Kilpatrick/The Canadian Press)

In the midst of an affordability crisis, much focus has been on housing or fuel prices, but a Conservative leadership candidate says Canada’s supply management system is also contributing to the rising cost of living and should be ended.

“For years, Canada’s bread makers colluded to inflate their prices. When the Competition Bureau caught them, they had to compensate Canadians. The Government of Canada has its very own price fixing system. It’s called supply management, and it inflates your grocery bill too,” says Conservative MP Scott Aitchison in an April 20 video.

Aitchison says the system keeps the supply low and puts “punishing taxes on imports,” hence the prices remain artificially high.

Supply management was implemented in the 1970s under the government of Pierre Trudeau to deal with price instability and fluctuations in farmers’ income, and it regulates the production of dairy, eggs, and poultry.

The market is tightly controlled, with farmers needing to buy a “quota” to be able to sell their products. The quota allows them to produce up to a set amount, which prevents market gluts that would drive down prices and negatively impact farm incomes.

Quota was initially free, but over the years it has gained high market value. A Library of Parliament research paper says the estimated total quota value was $36.9 billion in 2017 compared to $14.7 billion in 1998.

Quota varies by province. For example, setting up an average-size dairy farm—which is about 96 cows according to Dairy Farmers of Canada—in Ontario would cost around $2.3 million just to obtain the government’s permission to produce (96 multiplied by the average quota price of $24,000).

Aitchison says the high cost to get into the business is probably a reason why there are fewer small farms these days, noting that when supply management was implemented there were 100,000 dairy farms in Canada, whereas now there are fewer than 11,000.

The MP, who represents the riding of Parry Sound-Muskoka, also wants to open the market to foreign players and let Canadian farmers sell more abroad.

“I will end supply management to help Canadian families struggling with their grocery bills and high inflation. I'll do it to help our farmers who are stuck in a system that limits their ability to grow and compete and sell around the world,” he said.

Inflation

Inflation continued to run red hot in March at 6.7 percent, and it was driven higher by items controlled by supply management that are included in the basket of goods making the Consumer Price Index.

Statistics Canada reported that the price of dairy products and eggs rose 8.5 percent year-over-year in March, the largest increase since February 1983. The price of butter increased 16 percent, cheese 10.4 percent, and fresh milk 7.7 percent.

This was due in part to the fact that Canadian Dairy Commission (CDC), which is responsible for the administration of supply management, increased the farm gate milk price by 8.4 percent in February.

The CDC had announced the hike last October in order to “partially offset increased production costs due to the COVID-19 pandemic which caused revenues to remain below the cost of production. Feed, energy, and fertilizer costs have been particularly impacted.”

Supply Politics

Conservative MP and leadership race frontrunner Pierre Poilievre, who’s running on a “freedom” and anti-inflation platform, has said he supports “more choice and freedom in the agriculture sector,” but he would not do away with supply management.

Poilievre told the Western Standard in March the reason is farmers have had to pay millions of dollars to obtain quota.

“And furthermore, if we brought them [supply management controls] out, then it would cost more to do that than it would to keep the system that is in place right now,” he said.

Poilievre would instead look at reducing taxes and simplifying regulations to help the sector be more productive.

The issue of supply management also came up in the 2017 Conservative Party leadership race. Current People’s Party leader Maxime Bernier was the front-runner, but his stance against supply management cost him the race, assessed Kevin O’Leary at the time, who was also a candidate before dropping out.

Andrew Scheer, a proponent of supply management, won. Dairy Farmers of Canada (DFC) called Scheer a “safety net” against the removal of supply management from party policy in a briefing binder found during the Conservative Party convention in Halifax in 2018.

“The powers of the Leader are far reaching in preventing a policy from being in the party platform. DFC has been told by the Leader’s office that he will exercise this power, and that this policy will not be in the Conservative election platform regardless of the outcome at convention,” says the text in a photo of the binder posted by journalist Keean Bexte on Twitter.

Scheer has officially thrown his support behind Poilievre in the current leadership contest.